The Cost of Stock-outs in Healthcare

The real cost of unfilled orders is measured in OR delays and physician satisfaction, not just the time and energy to find the product

In the business world, stock-outs can result in unhappy customers waiting for a back-ordered item, or perhaps the cancellation of an order. For providers like hospitals, urgent care centers, and doctor’s offices, stock-outs can be more complicated. After all, a patient who urgently needs wound closure with suture cannot wait until that item is back in stock. In both situations, the outcome could be the same—when you’re upset with the service you received at a shop, you don’t go back. When you’re upset with the service you received at a hospital or doctor’s office, you find a new provider!

 

The True Cost

How do you measure what stock-outs truly cost a hospital or healthcare system? There are several factors to consider. There’s the inconvenience of the time and energy spent looking for a product, especially if your IT system tells you it should be in stock. Then there’s the frustration of trying to find a procedure tray or pharmacy item that simply is not where it is supposed to be. In the end, your workflow is disrupted, nurses are frustrated, your facility wastes money and, at worst, endangers a patient.

 

Why Do Stock-Outs Happen?

Thinking that stock-outs only happen due to unfilled orders (either on the provider or the distributor side) oversimplifies what can be a complicated situation. Poor inventory management ultimately ends in inventory glitches. Inadequate technology and processes result in hurdles such as stock-outs or overstocking (in fact, stock-outs can lead to overstocking as a safety net), high supply costs, high labor costs, and dissatisfied staff.

When an order remains unfilled or a hospital has already experienced a stock-out, nurses or other clinicians sometimes remove supplies from inventory in an attempt to eliminate stock-outs on their own. Safety stock, or just-in-case rather than just-in-time, leads to waste when items are overstocked and expire.

Another headache for inventory management is a true lack of visibility into a product or inventory. Real-time visibility into your hospital’s products, how many items are on hand, where they’re located, and at what rate they’re consumed can eliminate stock-outs and avoid associated problems.

 

OR Inventory Management Challenges

Addressing inventory management solutions in general is vital for supply chain effectiveness, but keeping control of costs in the OR is especially important. As we discussed in an earlier blog, “Your OR Spend,” the typical OR accounts for an average of 40% of total hospital expenses, and generates approximately 70% of revenue. Delays in the OR can cost a hospital or ambulatory surgery center millions over the course of a year. Stock-outs lead to delays, along with frustrated patients, higher supply costs, and displeased physicians and other clinical staff. If you are seeking a more focused inventory management solution, this is where you should devote time, resources, and money.

Challenges to OR inventory management that could lead to stock-outs include, but are not limited to:

  • Your distribution partner’s ability to stock all of the items you need
  • Physician preferences
  • Limited data
  • No automated inventory control system
  • Multiple categories of supplies

 

Where to begin?

Effective inventory management requires real-time visibility, and accurate tracking and forecasting. An effective, automated system, and adequate staff training, are also important. Determine what your PAR inventory level is and create processes that keep your inventory levels at that point.  Just-in-time delivery goes hand-in-hand with PAR level inventory management, and allows you to effectively reduce or eliminate stockpiling.

Finally, seek out the right distributor partner to help you meet your hospital or health system’s personalized goals. University of Vermont Medical Center was able to implement a stockless approach for suture and endomechanical supply by partnering with Suture Express. “With Suture Express, our inventory management approach is just in time, not just in case,” says John Collinsworth, Supply Chain Director at the University of Vermont Medical Center. High next-day fill rates help him avoid stock outs, eliminating the need to order excess inventory as a safety net to guarantee clinician needs are met.

 

To learn more about what Suture Express may be able to do for you, visit us at sutureexpress.com or call 877-790-1873.

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